The report’s key finding was that Telstra would benefit by $4.7 billion in net present value terms if it signed the deal with NBN Co compared with the value it might get if it rejected the deal and risked the regulatory consequences.
Photo: Jessica Shapiro

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Telstra’s value could rise if the national broadband network is cancelled after the next election, according to financial experts advising shareholders on whether to accept the company’s $11 billion deal with the agency building the government project.

The findings shed new light on the competing scenarios for the landmark network as Prime Minister Julia Gillard struggles to rebuild her political support and confronts the prospect of losing power to Opposition Leader Tony Abbott.

Expert advisers Grant Samuel concluded in their independent report that shareholders would have to consider a change in government as a key factor in their deliberations on the NBN deal, to be decided at an October 18 shareholder meeting.

Even if the government network were built more slowly than expected and signed up fewer customers than planned, Telstra would still be better off by signing the deal, Grant Samuel found.

But shareholders might not suffer if an Abbott government cancelled the NBN rollout after the election, due in 2013, and went ahead with an alternative broadband policy.

“In fact, a decision to terminate the NBN rollout could substantially increase the value of Telstra,” the experts found.

But the report added: “In reality it is unlikely Telstra would be able to revert to a ‘no-NBN’ world on a permanent basis as the new government is almost certainly going to seek to implement some form of enhanced broadband rollout across the country.”

The findings are central to the political debate over the NBN because they suggest that an Abbott government could make the case for an alternative broadband policy on the basis that it would not damage Telstra shareholders.

But Telstra shareholders would be better off approving the NBN deal whether the government network was built or not.

Grant Samuel found that co-operating with NBN Co, followed by a termination of the network in 2014, delivered an incremental net present value of $11 billion to Telstra shareholders.

It found that rejecting the deal and competing with NBN Co, followed by the termination in 2014, would deliver a $6.4 billion benefit to shareholders.

Both scenarios offer a better outlook for Telstra shareholders than the base case put forward in the expert report, in which the company cooperates with the NBN and the network is completed. This offers a $4.7 billion incremental gain in cash in net present value.